Tax Risk Research Articles

Analysis of Tax Risk Management and Control in Port Machinery Manufacturing Industry--Taking Enterprise S as an Example

Port machinery manufacturing has a long history in China and plays an important role in promoting the country's economic progress. Advanced port machinery not only enhances the ability of ports to handle goods, but also effectively cuts down on logistics expenses, thus solidly supporting the country's economic pulse. Against this background, preventing and dealing with the VAT tax risks faced by the port machinery manufacturing industry and improving tax compliance of taxpayers have become key issues. In this paper, a port machinery manufacturing enterprise in the stage of product upgrading and transformation is selected as the research object, and 2020 is taken as the benchmark, focusing on the tax situation of the enterprise in 2021 and 2022. In the case study of this enterprise, this paper adopts a tax-related risk model and longitudinal data analysis within the enterprise to identify in-depth the value-added tax (VAT) and corporate income tax (CIT) risks of the port machinery manufacturing enterprise, as well as the tax-related risks of the enterprise's investment and merger and acquisition business, so as to control the enterprise's tax risks and promote the sustainable development of the enterprise.

Research on Tax Management and Tax Risk Prevention Measures

Firstly, tax management is an important aspect of financial management, which involves the selection and calculation of taxes. However, tax management also carries various risks, and we need to adopt different approaches to avoid these risks. In this article, we will discuss the definition of tax management, the different stages involved in the tax management process, and the differences in tax management in different countries. Secondly, this article also conducted case studies on tax management and tax risk prevention strategies, in order to deepen the understanding of these issues and their impact on the company's financial health. This article first provides the definition of tax management and tax risk prevention strategies, and then delves into the different stages involved in the tax management process. At the same time, this article emphasizes the importance of tax risk prevention strategies in enhancing the financial health of companies, and conducts in-depth analysis of cases.

Assessment of Tax Risks Arising from Personal Income Tax Agents

Personal income tax (PIT) is one of the budget-forming taxes in the Russian Federation, therefore, an important direction of tax planning is the assessment of risks arising from both tax agents (at the micro level) and the state represented by tax authorities (at the macro level). The subject of the study is tax risks on personal income tax, and the purpose is to develop proposals for their assessment and reduction. Objectives: to classify tax risks according to personal income tax; to clarify the quantitative characteristics of tax risks; to identify directions of their decline. The relevance of the study is dictated by the need to study theoretical issues and practical aspects of the emergence of tax risks on personal income tax. The main methods of study are systemic, logical, theoretical cognition, scientific abstraction. The results of the study include the following: identification of the main types of tax risks for personal income tax and the development of a tax risks matrix for their assessment depending on residence, type of contract, amount of payment, court decisions, taking into account the possibility of identification, determination of amount of risk (arrears and penalties as well as intention). Conclusions: in the paper developed proposals for the assessment and reduction of tax risks under personal income tax: on the basis of the classification of tax risk (by subject, by basis of occurrence, by elements of taxation, by connection with tax checks, by types of risks, by the time of identification of tax risk, as well as taking into account the regional specifics) the amount of possible tax risk is calculated on the example of specific income (premium, financial assistance, gift) a tax risk matrix has been developed for practical application, which will enable to assess and rank tax schemes aimed at reducing tax obligations under personal income tax.

Innovative Development of tax Administration in Russia

The use of modern innovative technologies raises tax administration to a qualitatively new level of development, which determines the relevance of the study. At the same time, the digital transformation of the tax system should be based on classical principles of taxation, meet the interests of tax authorities and taxpayers, and prevent tax risks. The purpose of the study is to identify trends of tax administration in Russia and to develop a forecast of its innovative development from the standpoint of classical principles of taxation. To achieve this goal, it was necessary to solve the following tasks: problem statement; review of the main information technologies used by the Federal Tax Service of Russia; study of information exchange of data; determination of the impact of innovative development of tax administration on the activities of economic entities. In preparing the article, the authors used methods of analysis and synthesis of empirical data of information platforms, as well as a systematic approach and a method of interpreting the results during scientific research. The novelty of the paper lies in the author’s view of the prospects for the innovative development of tax administration. The results of the study proved the high efficiency of the digital technologies used. It is shown that the innovative development of administration strengthens tax control, increases budget revenues, increases the role of the state in the field of taxation. It is concluded that innovative tax administration significantly affects the behavior of taxpayers, causes their concern about the growth of tax risks. The completed forecast of innovative development of tax administration showed a high probability of changing the status of an organization to an individual entrepreneur, loss of tax revenues from developing e-commerce.

Tax Indemnification and Unrecognized Tax Benefits in Mergers and Acquisitions

ABSTRACT Tax indemnification transfers the risk of potential tax settlements from a taxpayer to an external party. Current accounting standards require firms to reflect unrecognized tax benefits (UTBs) even when the underlying tax position has indemnification. Practitioners suggest that financial statement disclosures regarding tax indemnification are necessary to allow users to assess tax risk adequately. However, acquirers rarely disclose tax indemnification arrangements from merger and acquisition (M&A) contracts. Evidence suggests that tax indemnification attenuates the positive association between UTBs and future tax cash outflows. Moreover, results are consistent with indemnification agreements resulting in minimal settlements. Because of the effect that removing accounts associated with lapsed indemnification agreements has on effective tax rates and the attenuating effect that indemnification has on UTB’s association with future tax cash outflows, the findings could be of interest to the Financial Accounting Standards Board regarding their income tax disclosure project. JEL Classifications: M48; M41; G34.

Realization of the fiscal and regulatory potential of the corporate income tax

The subject of the study is the fiscal and regulatory possibilities of corporate income tax, its structural elements and their impact on the economic activity of business entities. The purpose of the study is to identify possible ways to expand the use of the fiscal and regulatory potential of corporate income tax as an important tool for stimulating economic activity. The paper provides an assessment of the level of corporate income tax revenues to the budget system of the Russian Federation, analyzes the factors constraining the realization of its fiscal potential. Special attention is paid to the analysis of corporate income tax revenues based on the materials of one of the subjects of the Russian Federation with a low level of production and investment potential – the Republic of Dagestan. The conclusion is argued that despite the excess of the growth rate of income tax to the budget over the overall growth of tax revenues, the potential for increasing budget revenues due to an increase in the tax burden has been exhausted. Considerable attention is paid to the instruments for stimulating investment activity provided for by the current tax legislation on corporate income tax. The need to achieve the set research goal led to the expediency of using a set of different methods and techniques: the transition from the general to the particular, logical inference, observation, generalization, systematization, comparison, factor analysis, synthesis, a systematic approach. The research is based on official analytical data from the Federal Statistics Service of the Russian Federation, the Federal Tax Service of Russia, as well as the Office of the Federal Tax Service of Russia for the Republic of Dagestan. The scientific novelty of the study is to develop a set of recommendations aimed at realizing the fiscal and regulatory potential of income tax in the context of stimulating investment activity of organizations and reducing tax risks. The conclusion is substantiated that it is necessary to achieve an increase in corporate income tax revenues not by increasing the fiscal burden, but by fully realizing its regulatory potential as a tool to stimulate economic activity. Recommendations are formulated aimed at improving the investment tax deduction for corporate income tax as a tool to stimulate the acceleration of the renewal of worn-out fixed assets. It is noted that strategically important internal reserves for increasing income tax revenues can be both the growth of the tax base due to the intensification of economic activity of the subjects of the Russian Federation, and comprehensive solutions aimed at reducing tax risks.

Возмещение расходов посредника на исполнение поручения: критерии издержек, анализ и идентификация налоговых рисков

The article makes an attempt at scientific systematization of criteria that expenses of an intermediary associated with execution of an order and recoverable in accordance with Clause 2, Art. 975, Art. 1001 of the Civil Code of the Russian Federation must meet for taxation purposes; the paper also attempts at singling out the related tax risks. In the opinion of the author of this article, meeting the proposed criteria will ensure legal certainty for economic entities taking part in intermediary relations and reduce the risk of potential disputes with the tax authority.

The moderating effect of tax risk on the relationship between tax avoidance and firm risk: empirical evidence in the French context

PurposeThis paper aims to study the impact of tax avoidance on corporate risk. It also examines the moderating impact of tax risk on the relationship between tax avoidance and firm risk.Design/methodology/approachBased on available information in the DATASTREAM database about a sample of French firms listed in the CAC 40 from 2010 to 2022, the study uses the feasible generalized least squares method to investigate the impact of tax avoidance on firm risk and the moderating impact of tax risk. To check the robustness of our results, the authors changed the measurement of variables to identify potential biases and they significantly mitigated the endogeneity concerns using instrumental variable regression. Additional estimations were performed, first by using book-tax differences (BTD) and its components, i.e. temporary and permanent, and second by retesting hypotheses of years before the outbreak of the corona virus disease 2019 (COVID-19) pandemic.FindingsThe results show that tax avoidance negatively affects the firm risk while tax risk has a positive effect on firm risk. More importantly, tax risk moderates the negative impact of tax avoidance on the firm risk. When tax avoidance is associated with a high level of tax risk, it leads to a high firm risk. Accordingly, tax avoidance should be considered in conjunction with tax risk when studying the effect put on the firm risk. Further analyses indicate that tax risk moderates the negative relationship between permanent BTD and firm risk.Research limitations/implicationsThe major limitation of this study is that it focuses only on French-listed firms, which make it difficult to generalize the results. Furthermore, the authors did not introduce governance variables into our models. An effective governance system and transparent information can reduce some of the perverse effects of risky tax avoidance by reducing the tax avoidance costs. The obtained results are of great interest to researchers who need to include the tax risk concept in their examination of the tax avoidance impacts.Practical implicationsThe results are useful for investors wishing to make sound decisions regarding risky tax avoidance practices. Furthermore, the results may signal the need for French policymakers to make more efforts to reduce risky tax avoidance activities that are harmful to investors. They must enforce the existence and the reporting of a tax risk management strategy by firms.Originality/valueThis study contributes to the growing body of literature on the tax avoidance effects with a special focus on firm risk. This study provides the first French evidence of the role of tax risk in the relationship between tax avoidance and firm risk.

Digitalization and the Changing Landscape of Tax Compliance (Challenges and Opportunities)

This research discusses the impact of digital transformation on tax compliance by conducting a systematic literature review. Through appropriate keyword selection, relevant articles were identified from leading academic databases such as Scopus, IEEE Xplore, ScienceDirect, JSTOR, and Google Scholar. Analysis of the literature reveals technological complexity, increasing administrative efficiency, and emerging regulatory challenges as the main categories. Apart from that, information disclosure, the use of new technology in tax risk analysis, and changes in the paradigm of taxpayer involvement are also the main focus. In conclusion, digital transformation not only creates new challenges in tax compliance, but also brings opportunities to increase the effectiveness and openness of the tax system.

The EU Public Country-by-Country Reporting – A Case Study on Tax Risk Assessment

Public country-by-country reporting has finally been implemented in the European Union. Based on a case study approach, this article analyses whether the existing OECD tax risk indicators can also be reasonably applied to the EU Public CbCR to detect potential tax risks.

Research And Analysis on Tax Risk Management of Enterprises Proposed for IPO

In recent years, IPO has become one of the important financing methods for many enterprises, and IPO listing has brought more resources and opportunities for many enterprises. However, some enterprises to be listed on the IPO lack the awareness of risk avoidance and do not do a good job in tax management, which leads to negative impacts on the IPO listing and even failure of the IPO listing, which can be seen from the fact that enterprises deal with the tax-related issues is a key factor for the success of the listing on the IPO, and it is very important to carry out effective tax risk management. Effective tax risk management is of great importance. This paper analyses the tax risk problems of IPO enterprises by studying the tax risk problems of today's IPO enterprises and puts forward suggestions for tax risk management of IPO enterprises, as well as puts forward the outlook for future research.

The long way to tax transparency: lessons from the early publishers of country-by-country reports

In this paper, we analyse a sample of voluntarily published country-by-country reports (CbCRs) of 35 multinational enterprises (MNEs). We assess the value added and the limitations of qualitative and quantitative information provided in the reports based on a comparison to individual MNEs’ annual financial reports and aggregate CbCR data provided by the OECD. In terms of data quality, we find that the inclusion of intra-company dividends and equity-accounted profits are a minor concern on average but that for individual MNEs corrections might be substantial. Our sample MNEs seem to pay higher effective tax rates than the global average and many of them report relatively little profit in tax havens. We only find a very weak correlation of the location of profits and effective tax rates. This might indicate that more tax transparent MNEs avoid taxes less aggressively. However, our assessment of different tax risk indicators reveals important variations between companies.

УПРАВЛІННЯ ПОДАТКОВИМИ РИЗИКАМИ ПІДПРИЄМСТВА ЧЕРЕЗ ІНСТРУМЕНТ СТРАХУВАННЯ

The introduction of the newest tax risk management approaches has become more and more critical for Ukrainian enterprises. This paper analyzes and summarizes international experience in tax risk management and defines trends in this area. The author presents several recommendations for improving fiscal relations using an insurance coverage mechanism. The article also emphasizes the changes in tax relations determined by the development of information technology, as well as new opportunities and challenges associated with these processes. The methods used worldwide to manage these processes are analyzed in order not only to mitigate tax risks but also to implement necessary changes required to make tax function more efficient in a company. Given the complexity of tax regulations and the development of new instruments for managing tax risks, the author proposes to consider and put into practice the US experience, where, as a way of providing transparency and consistency in accounting for income tax liabilities, Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48) was adopted in 2006 by the FASB. Practical foreign experience of insurance coverage for tax risks, uncertain tax positions, and the potential development of such insurance in Ukraine are outlined. It is noted that the essence of tax risk insurance is to cover possible financial losses incurred by a business entity as a result of changes in tax legislation or an unformed approach of court practice. It is determined that there are certain inconsistencies in the sectoral legislation regarding the absence of rules governing tax risk insurance. At present, the national legislation does not define tax risk insurance as an independent class of insurance (or its component), which reduces its effectiveness. The development of tax risk insurance in Ukraine could become an effective tool to help minimize business risks of monetary liabilities to the budget. The authors argue that there is a need for high-quality transformation in the transparency of business, accounting, financial, and tax reporting within relationships with tax authorities. In addition, it is determined how the implementation of the Standard Audit File (SAF-T) could affect the taxpayer's cooperation with the government and insurers in assessing tax risks.

СУТЬ ТА ПРИНЦИПИ ПРОЦЕСУ УПРАВЛІННЯ ПОДАТКОВИМИ РИЗИКАМИ СУБ’ЄКТІВ ГОСПОДАРЮВАННЯ

The constant change in the rules of the game in the field of taxation, the frank fiscal attitude of the controlling authorities towards taxpayers, the complexity of the legislation and the increase in the amount of tax obligations – all this requires business entities to take measures to manage their tax risks. During the last decades, the importance of this issue is only growing. Even trying to strictly follow the norms of tax legislation, business cannot always count on a constructive dialogue with tax authorities. Tax requirements around the world are increasing at a rapid pace, tax authorities are significantly intensifying their efforts in the field of tax collection, making significant investments in data, technology, and qualified specialists. In this regard, a change in the thinking of business entities can be observed: the tax minimization strategy is replaced by a new tax risk minimization strategy. It should be the basis of the modern process of tax risk management of business entities, which is becoming especially relevant today. To effectively manage your tax risks, you need to know both the theoretical and practical aspects of this process. The purpose of the article is to reveal the essence of the process of tax risk management of economic entities, to define its constituent elements and principles, to classify forms of tax risk management, to find possible ways to reduce the impact of external and internal factors of tax risks. The theoretical and methodological basis of this scientific research is analysis, synthesis, induction, deduction, analogy, abstraction, concretization and comparison. The article concludes that the theoretical and practical aspects of the process of tax risk management of business entities are mainly based on the general concept of risk management. In particular, this concerns the purpose of this process and the typical composition of its elements. And the specificity of tax risk management in comparison with other financial risks is the need to have deep professional knowledge in the field of accounting and taxation and the application of such risk management methods that arise from the main factors that can cause the emergence of tax risks.

Налоговые риски в контексте достижения национальных целей развития России на 2024 год

The subject of the study is tax risks arising in the implementation of strategic tasks of Russia's development to ensure the achievement of socially significant results in the breakthrough scientific, technological and socio—economic de-velopment of the country, improving people's living standards in 2024. The objectives of the work are to identify the essence and sources of significant tax risks that create uncertainty in the implementation of strategic objectives of Russia and national projects, and the formation of their consequenc-es/probabilities matrix. The sources of tax risks visualized using the Ishikawa method are analyzed. The key problems preventing the successful fulfillment of the strategic tasks set for the Russian economy and the implementation of na-tional projects are shown. The essence of tax risks is established as a result of the influence of tax uncertainties on the fulfillment of the tasks of national pro-jects and the ways to prevent them as a result of the control and analytical work of tax authorities aimed at ensuring macroeconomic stability and a steady increase in socio-economic indicators are presented. Proposals have been formulated to eliminate the sources of tax risks. The con-clusion is made about the need for continuous tax control of tax risks during the entire period of fulfillment of the national development goals of Russia.

ЦИФРОВІЗАЦІЯ ОПОДАТКУВАННЯ ЯК МЕТОД ПОПЕРЕДЖЕННЯ ТА МІНІМІЗАЦІЇ ПОДАТКОВИХ РИЗИКІВ НА ПІДПРИЄМСТВІ

Risk tolerance is the main element of the functioning of economic entities. Taking into account the spheres of influence on the activity of the enterprise, tax risks play a significant role as an element of the financial risks of the enterprise, therefore every taxpayer should be aware of measures and methods of prevention and minimization of tax risks. In the conditions of the rapid and forced progress of digitalization, in the medium term, a significant number of electronic tools for communication with the state and controlling bodies have been created for business entities. The implementation of digital technologies and innovations, state support for business development has a significant contribution to improving the work of enterprises. In the field of taxation, the pace of digital innovations is quite moderate, taking into account the tax awareness of taxpayers and the popularization of electronic tax products, but they are confident and consistent. Business entities, as of the current day, have at their disposal information that provides the possibility of analysis, comparison and control of indicators of economic activity for the formation of measures and methods of prevention and minimization of tax risks. The article emphasizes the need to use digital technologies in the field of accounting and reporting; administration and the tools of electronic services, digital platforms aimed at conducting business and its service (electronic document flow, accounting, analytics, reporting, control) are singled out. It was determined that the generalization of information from electronic services at the state level makes it possible to determine the real and potential tax risk at the enterprise. Accumulation of the specified information and ranking of the sphere of influence, respectively, forms the foundation for determining measures and methods of prevention and minimization of tax risks, which is a component of the enterprise management system in modern realities.

Changes in Tax Burden, Solvency, Profitability, Operating Ability and Growing Ability: A Factor Analysis of China International Logistic Companies

Amid the expansion of global trade, China’s prominence in international commerce is clear, yet its international logistics companies face significant challenges related to tax risks and financial stability. This study examines the financial performance and tax risk of the international logistics sector in China, focusing on key indicators of tax burden, solvency, profitability, operational efficiency, and growth capacity. Employing factor analysis on data from 28 listed logistics firms in China from 2020 to 2022, the study investigates the interrelationships and overall impact of these indicators. The findings reveal that tax burdens exceed industry standards, solvency is weak, and profitability is influenced by both internal and external factors. Additionally, operational efficiency and growth capacity show significant gaps. This analysis identifies critical areas where logistics companies should adopt adaptive tax strategies, optimize debt structures, and invest in operational efficiency to enhance long-term sustainability. Strategic agility in responding to market trends is crucial for capitalizing on growth opportunities, particularly among logistics companies where these actions will strengthen financial performance and global competitiveness.

Exploring the Application of Financial Indicator Prediction Models in Optimizing Tax Burden

Abstract As economic globalization progresses unceasingly, the financial activities of enterprises are increasingly complex, paralleled by a concomitant increase in the intricacy of tax laws and regulations. Consequently, the tax risks faced by enterprises are becoming more pronounced. To predict the financial status of enterprises, a logistic regression model is created by combining relevant financial indicators. Considering the large amount of enterprise financial sample data, a Lasso-Logistic regression model is constructed, and the ADMM algorithm optimizes the model to improve the model's prediction accuracy. Finally, after using the ROC curve to test the validity of the constructed financial index prediction model, the A-share listed companies in the advanced manufacturing industry are taken as the research object of empirical analysis to analyze the relationship between the impact of financial indexes on tax burden. The regression equation for the standardization of tax burden is tax risk = -0.02341+0.03572 VAT effective tax burden +0.15451 income tax effective tax burden +0.21118 current ratio -0.26875 total asset turnover +0.06574 current sales revenue +0.02432 current cost of goods sold +0.13681 gearing ratio + 0.23708 Fixed Assets Change Ratio - 0.26895 Asset Size. Based on the analysis results, this paper proposes three optimization strategies for tax burden.

РИСКИ В УСЛОВИЯХ НАЛОГОВОЙ КОНКУРЕНЦИИ СТРАН

The article defines and types of tax competition, describes tax risks. The positive and unfair consequences of tax competition are analyzed; economic factors affecting the state and functioning of the state tax system are presented. The reasons for the occurrence of tax risks are disclosed. The measures of their minimization in the conditions of tax competition are proposed. The steps aimed at improving the competitiveness of the Russian tax system are formulated.

IDENTIFYING BEHAVIORAL RESPONSE TO TAX CHANGE OF LABOR INCOME IN UKRAINE

Introduction. The National Revenue Strategy states that one of the directions for the further development of the national taxation system is the restoration of the progressive rates’ scale of personal income tax. Such a proposal looks appropriate and corresponds to the trends in the development of the labor market, the system of income generation in the national economy, and the demands of society. At the same time, the opportunistic reaction of taxpayers to the introduction of additional (increased) tax rates may lead to further evasion of labor income from taxation and, accordingly, an increase in tax risks of the state budget. Purpose of the article is to identificate of the behavioral response effect of the economic agents to tax change of labor income in Ukraine. Results. Changes in the taxation of labor income in 2015-2017 are characterized by the dynamics of such analytical indicators as the average effective tax rate and the tax wedge. The nominal growth of the wage fund in 2016 and 2017 is due to the following changes in taxation: an increase in the tax base and an increase in the average effective tax rate. In the short and medium term, reducing the tax burden did not have the expected positive effect, as predicted by the logic of Laffer's model. There is a significant increase in the share of wages at the average level, from 53.5% in 2012 to 63.8% in 2020. The share of labor income in the intervals from the lowest to the average earnings as of 2020 was more than 80%. The presence of an alternative system of income taxation with a significantly lower level of tax burden than the general system creates additional risks of effective implementation of personal income tax with a progressive scale of rates. Conclusions. The system of formation and distribution of labor income has undergone significant changes. The extremes of the income distribution (lowest and highest) were in relative gain compared to others. the introduction of a progressive scale of taxation rates exclusively for labor income in Ukraine does not have sufficient fiscal potential. In the case of a suboptimal political decision, with insufficient institutional capacity of control bodies and the presence of an alternative system of income taxation, there is a high probability of a significant increase in tax risks for state and local budgets.